Whyte of the long knives
24/05/2011 240 Comments
The news that Alastair Johnston and Paul Murray have been removed from the Rangers’ board, swiftly followed by reports that Martin Bain and Donald McIntyre have been suspended pending an inquiry into financial irregularities, is somehow still stunning despite its predictability. What makes these events remarkable is the lack of decorum. Whyte was always going to form his own board. In fact, I have been surprised that he has waited this long. (Some have suggested some legal i-dotting and t-crossing was required before Whyte could act). However, following most takeovers, the changing of the guard usually proceeds without much of a fuss or fanfare. The rules for how to remove board members varies from company to company, but the mechanics for a new owner to place his own directors on the board should be straightforward. When you own 85% of the company, you can have the directors of your choice. (Dave King’s board seat may be guaranteed by previous contracts related to his original investment). It is the style of this “night of the long knives” that marks a stunning departure for Rangers (or at least a leap back to pre-David Murray times).
This blog has nodded and winked at the extent of wrong-doing by prominent members of the Rangers board. I know for a fact that the actions of some board members would shock even those who has been following the financial fate of Rangers FC closely. At some point this was always going to explode. However, there are more questions than answers about Whyte’s motivations in acting now and in this manner.
Has Whyte had a sudden epiphany after getting access to the ‘real’ behind the scenes information? Contrary to popular myth ‘due diligence’ does not guarantee that a potential buyer gets access to all of the information he requests. The seller always has the right to simply withhold any data of his choice. The only obligation of the seller is to not tell outright lies about the prospects for the firm.
Alternatively, is this just a stage-managed event to portray the previous board as the villains who will be responsible for any failure to deliver on promises leaked to the media during the long takeover process?
Are Martin Bain and Donald McIntyre under investigation for EBT-related activities or is this a separate issue altogether? I can say that the EBT-related activities of board members was not some rogue action secretly executed by one or two individuals. To a fault, board members over-communicated what they were doing. If today’s news is EBT-related, then I would be ready to declare these dramatic moves as a smokescreen to distract from other actions. Every Rangers FC board member since 2001 will have been aware of the EBT. I know of five who definitely had detailed involvement in its operation. Two of these directors remain on the board.
We cannot ignore the fact that as executive directors, Bain and McIntyre will be on significant salaries and will likely have some job security through multi-year contracts. Such contracts can only be terminated for ’cause’. Such cause has to be very serious for terminations to be upheld, but if a case can be made that shows the executive to be untrustworthy, the terminations will stick. This could all just simply be a pretext to fire two highly paid people without having to pay them for the remainder of their contracts.
The refusal of Alastair Johnston and Paul Murray to resign is a further sign of their deep misgivings about the new Rangers ownership. That Johnston broke with the standard cover story about ‘confidence’ over the tax case to express concerns that Whyte had shown no proof of having the funds to pay such a bill would have made his removal inevitable. That Paul Murray broke ranks to try to organise an alternative financing program to thwart Whyte’s advances will also have marked his cards. However, this is just standard corporate politics and normally defeated directors in a hostile takeover fall on their swords. This is inevitable when 85% of the shares are held by one shareholder. That both Johnston and Murray have tried to make as big of a splash on their departures as possible can be interpreted as a warning. I am bound by a promise of confidentiality to a source of information, but I know that Johnston and Murray would have solid reasons (not tax case related) to want to send a warning to the Rangers support at-large.
It will be interesting to see how willing and/or able these four directors will be to speak to the media (old and new). Even if gag-agreements are in place leaks happen in the normal course of events. The challenge will be for the Scottish media to publish their comments. Most Scottish media outlets will want to continue dining on the easy meals of succulent lamb fed from Ibrox. Journalists whose salaries depend on getting their quota of transfer exclusives and interviews with players will fear retribution for printing anything not approved by the new politburo. However, I suspect that Hay McKerron will be busier than they ever imagined in the coming weeks.